Apparel Firms Reel in Wake of Lerner Action

Benjamin Ossman remembers it as “black Monday.”

On April 8, the chairman and chief executive of Quartet Fashions went to his New York office and learned that Lerner Stores had refused to take delivery of $637,000 worth of garments. At 2:15 p.m., Ossman received a three-sentence telegram from Lerner, saying the chain was canceling all orders while it evaluated inventories.

“That was the most shocking and surprising day of my life,” Ossman said. He was left with $4 million worth of merchandise, which he was able to sell--although at a 25% to 30% discount--to other retailers.

Ossman was one of 100 U.S. manufacturers caught off guard by Lerner’s abrupt cancellation of $100 million of orders. The action, unprecedented in scope, sent angry apparel manufacturers scrambling to unload merchandise. “The entire market was up in arms,” Ossman said.

Lerner’s cancellation came less than a week after the Limited Inc. assumed control and ousted top management at the budget chain it had recently purchased. Normally, manufacturers and retailers work quietly together when an order is canceled. But, in Lerner’s case, at least two New York-based apparel companies--Russ Togs and Starlight Trading--have gone to court to seek remedies.

Other apparel makers, concerned that Lerner’s action might, if unchallenged, set a precedent, have held meetings on both coasts.

So far, the groups have ruled out class-action suits. About 35 members of the California Apparel Manufacturers Productions who met Friday agreed to send a letter of concern to Leslie H. Wexner, chairman of the Limited and Lerner. The trade group said nine of its members suffered order cancellations totaling $1.85 million.

Ossman, who derives nearly one-fifth of his $100 million in annual sales from Lerner stores, says he has asked to meet with Wexner before month’s end. “In 25 years, I have never taken legal actions against anybody in business and vice versa,” he said, adding that he plans to give Wexner the benefit of the doubt and talk to him.

The Limited executives, who were not available for comment, have said the cancellation was necessary to clear up irregularities and poor record keeping. They also have said that they are reinstating some orders.

Sid Ostrovsky, vice president of Surf & Turf of California, said Lerner reinstated an order for 8,000 of an original 14,000 dresses and jumpsuits.